Annual Report for the year ended 31 December 2008

1. aCCoUntinG PoliCies (CONTINuED)
Standards, amendments and interpretations to existing standards that are
not yet effective and have not been early adopted by the Group. The following
interpretations and amendments to existing standards have been published
and are mandatory for the Group’s accounting periods beginning on or after
1 January 2009 or later periods, but the Group has not early adopted them:
• iFrs 8, ‘operating segments’ is required to be adopted for the Group for
the financial year ending 31 December 2009. The standard requires a
‘management approach’ under which segmental information is presented
using the same method as that adopted for internal reporting purposes.
This is not expected to have a significant impact on the Group;
• iAs 23 (amendment), ‘Borrowing costs’ is required to be adopted for the
Group for the financial year ending 31 December 2009. The amendment
requires borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset to be capitalised. The
option of immediately expensing those borrowing costs will be removed.
This is not expected to have a significant impact on the Group;
• iAs 1 (revised), ‘presentation of financial statements’ is required to be
adopted for the Group for the financial year ending 31 December 2009.
The revised standard requires comparative information to be reclassified
or restated, and a restated Balance sheet as at the beginning comparative
period in addition to the current requirement to present Balance sheets
at the end of the current period and comparative period to be shown.
This is not expected to have a significant impact on the Group;
• iFrs 2 (amendment), ‘share-based payment’ is required to be adopted for
the Group for the financial year ending 31 December 2009. This amendment
clarifies that vesting conditions are service conditions and performance
conditions only. other features of share based payments are not vesting
conditions. This is not expected to have a significant impact on the Group;
• iAs 32 (amendment), ‘Financial instruments presentation’ is required to
be adopted for the Group for the financial year ending 31 December
2009. This amendment clarifies the classification of puttable financial
instruments and obligations arising on liquidation. This is not expected to
have a significant impact on the Group;
• iAs 27 (revised), ‘consolidated and separate financial statements’ is required
to be adopted for the Group for the financial year ending 31 December 2010.
The revised standard requires the effects of non-controlling interests to be
recorded in equity while no change in control will no longer result in gains
or losses in goodwill. The Group is assessing the implications of this change;
• iFrs 3 (revised), ‘Business combinations’ is required to be adopted for
the Group for the financial year ending 31 December 2010. The revised
standard results in changes to the acquisition method of business
combinations. The Group expects that this revision will impact the
accounts for business combinations in the financial year ended 2010;
• iFrs 5 (amendment), ‘non-current assets held-for-sale and discontinued
operations’ is required to be adopted for the Group for the financial year
ending 31 December 2010. The amendment clarifies that all of a subsidiary’s
assets and liabilities as held-for-sale if a partial disposal will result in loss
of control. This is not expected to have a significant impact on the Group;
notes to tHe FinanCial statements CONTINuED
FOR THE YEAR ENDED 31 DECEMBER 2008
50 The evoluTion Group plc AnnuAl reporT & AccounTs 2008
• iAs 36 (amendment), ‘impairment of assets’ is required to be adopted for
the Group for the financial year ending 31 December 2009. The amendment
requires fair value less costs to sell is calculated on the basis of discounted
cash flows. This is not expected to have a significant impact on the Group;
• iAs 38 (amendment), ‘intangible assets’ is required to be adopted for the
Group for the financial year ending 31 December 2009. The amendment
defines a prepayment as being recognised only if payment has been
made in advance of receiving the right to goods or receipt of services.
The Group is assessing the implications of this change; and
• iAs 39 (amendment), ‘Financial instruments: recognition and measurement’
is required to be adopted for the Group for the financial year ending
31 December 2009. This amendment allows movements from fair value
through profit or loss category where a derivative commences or ceases to
qualify as a hedging instrument in cash flow or net investment hedge.
2. FinanCial instRUments and RisK manaGement
Through its normal operations, the Group is exposed to a number of risks,
the most significant of which are market, credit, and operational risks. The
Group’s Balance sheet includes large cash balances which are exposed to
interest rate risk. in 2008 the Group’s finance income was affected by the
Bank of england’s decision to cut interest rates, in 2009 the Group’s finance
income will continue to be affected by any further adjustments to the Bank
of england’s interest rate policy. The Group has minimal exposure to foreign
exchange risk. its strong cash and cash equivalents position also ensures
that it has low liquidity risk.
Risk Management Framework
The Group Board is responsible for approving all risk management policies
and for determining the overall risk appetite for the Group.
The Audit committee is responsible for reviewing the Group’s internal control
and risk management systems.
Risk Committee
The Group’s Directors have delegated to a sub-committee, the risk
committee, the responsibility for setting the risk management policies
applied by the Group and its subsidiaries.
The purpose of the risk committee is to monitor and assess all types
of risk within the Group and to ensure that internal controls are properly
established so that the Group’s risk exposure is commensurate with the
wishes of the Board. in addition, the risk committee tracks external market
events and tries to evaluate their impact on the Group. The risk committee
meets at least monthly and is chaired by the head of risk.
Risk Department
The risk Department has day-to-day responsibility for monitoring, mitigating
and reporting risks within the Group and for escalating issues to senior
management. The risk Department follows the guidelines laid down by the
credit policy, the credit limit Book, the Trading policy statement and the
operational risk policy as approved by the Group Board, the Audit committee
and the risk committee. The Treasury Department is responsible for
hedging foreign exchange risk and for managing liquidity.